Shutdown may spark rash of mortgage delinquencies
WASHINGTON – Jan. 8, 2019 – The government shutdown became the third-longest in U.S. history Monday. While it directly impacts 800,000 federal workers, nearly 4 million government contractors are also braced for a pause in their paychecks.
A long shutdown disruption could soon impact the ability of many affected homeowners to pay their mortgages and renters to pay their rent: 23 percent of Americans have no emergency savings, and 22 percent have less than three months' worth built up, according to a 2018 Bankrate.com survey. Missed mortgage payments could, in turn, affect homeowners in other ways.
"Any delay in a mortgage payment could harm an individual's finances and their credit, which would affect potential purchases in the future," Jessica Lautz, managing director of survey research at the National Association of Realtors®, told CNBC.
The U.S. Office of Personnel Management (OPM) is trying to help federal workers who may be facing missed mortgage payments. It's released sample letters that federal workers can give to lenders that explain why they may be late on their payment.
The OPM advises government workers to first speak to lenders or landlords before sending a letter because some may be understanding and help them work out a reduction in monthly payments during the shutdown.
If such a workaround is reached, however, OPM advises sending a follow-up confirmation letter to the lender or landlord.
To see the OPM letter recommendations (a Word document will automatically download to your device), go to: https://t.co/t6h6OzALsS
Some banks are already making exceptions for those affected by the government shutdown. For example, Flagstar Bank offers a special program "that provides [government workers] with extra time to coordinate their finances without causing additional fees and/or impacting their credit reporting negatively."
Other banks, such as Citi, Wells Fargo and Chase, told CNBC that customers who contact them may be eligible for workaround options on their mortgages, such as short-term forbearance, repayment plays or loan modifications.
Source: "Rent, Mortgage Payments Hard to Meet for Workers Entangled in the Government Shutdown," CNBC (Jan. 4, 2019)
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